a. What are PTIs net profits? b. How much does PTI spend on promotional activities? c. Is

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Question:

a. What are PTI’s net profits?

b. How much does PTI spend on promotional activities?

c. Is Gémozac’s request relatively large (relative to its profitability)? Why or why not?

d. By how much would Gémozac need to increase revenues in his territory in order to justify the expense?

e. If you were Harrington, what would you say?

PTI is a successful specialty tubing company extruding tubing used in medical and manufacturing applications. It holds several patents for its plastics and resins used in the extrusion process. Revenues for this year are forecasted at $300 million, an increase of 7.5% over last year. PTI’s latest net profit margin is 5.5%.

PTI’s sales force consists of 30 sales representatives spread across the US, Europe, Oceania/Australia, and Asia. The firm has contractual agreements with manufacturers’ reps across other regions of the world.

PTI relies heavily upon its sales force for execution of most elements of the promotional mix. It occasionally does direct mail and participation in a few critical tradeshows in important geographic locations. It is estimated that PTI spends lessthan two 100th of a percent of its sales on promotional activities in any given year.

Pierre Gémozac, PTI’s rep for France, Spain, Portugal, and the Benelux countries has brought to Eve Harrington, PTI’s VP of Sales, an opportunity to participate in an upcoming tradeshow held in Paris called ResinCon. Pierre claims that it will prove to be an excellent source of lead generation for his region. The region currently generates about 4.5% of the firm’s revenues. Harrington considers that quite reasonable given the industrial base and size of the region. However, she does realize that the region is having economic difficulties. Sales haven’t grown considerably in the past five years. The tradeshow would cost 90,000€ (approximately $US 105,000). Gémozac argues that the amount represents only 0.035% of PTI’s sales, so it is quite affordable.